Following the Money: Tools and Techniques to Combat Fraud — Committee on Financial Services (April 1, 2025)
Summary
Transcript of the hearing Following the Money: Tools and Techniques to Combat Fraud, before the Subcommittee on National Security, Illicit Finance, and International Financial Institutions of the Committee on Financial Services, U.S. House of Representatives, on April 1, 2025 (Serial No. 119–12). Opening statements are listed for Chairman Warren Davidson and Ranking Member Joyce Beatty, with a statement by Hon. Maxine Waters. Witnesses were Mr. Darrin McLaughlin of Flagstar Bank for the American Bankers Association (ABA), Ms. Jacqueline Burns Koven of Chainalysis, Mr. Jeff Brabant of the National Federation of Independent Business (NFIB) and Ms. Kathy Stokes for the American Association of Retired Persons (AARP). Appendix material includes a CFP Board Letter.
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“Following the Money: Tools and Techniques to Combat Fraud — Committee on Financial Services (April 1, 2025).”
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FOLLOWING THE MONEY: TOOLS AND
TECHNIQUES TO COMBAT FRAUD
HEARING
BEFORE THE
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT
FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
APRIL 1, 2025
Serial No. 119–12
Printed for the use of the Committee on Financial Services
(
www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
59–941 PDF WASHINGTON : 2025
HOUSE COMMITTEE ON FINANCIAL SERVICES
FRENCH HILL, Arkansas, Chairman
BILL HUIZENGA, Michigan, Vice Chairman MAXINE WATERS, California, Ranking
FRANK D. LUCAS, Oklahoma Member
PETE SESSIONS, Texas SYLVIA R. GARCIA, Texas, Vice Ranking
ANN WAGNER, Missouri Member
ANDY BARR, Kentucky NYDIA M. VELÁZQUEZ, New York
ROGER WILLIAMS, Texas BRAD SHERMAN, California
TOM EMMER, Minnesota GREGORY W. MEEKS, New York
BARRY LOUDERMILK, Georgia DAVID SCOTT, Georgia
WARREN DAVIDSON, Ohio STEPHEN F. LYNCH, Massachusetts
JOHN W. ROSE, Tennessee AL GREEN, Texas
BRYAN STEIL, Wisconsin EMANUEL CLEAVER, Missouri
WILLIAM R. TIMMONS, IV, South Carolina JAMES A. HIMES, Connecticut
MARLIN STUTZMAN, Indiana BILL FOSTER, Illinois
RALPH NORMAN, South Carolina JOYCE BEATTY, Ohio
DANIEL MEUSER, Pennsylvania JUAN VARGAS, California
YOUNG KIM, California JOSH GOTTHEIMER, New Jersey
BYRON DONALDS, Florida VICENTE GONZALEZ, Texas
ANDREW R. GARBARINO, New York SEAN CASTEN, Illinois
SCOTT FITZGERALD, Wisconsin AYANNA PRESSLEY, Massachusetts
MIKE FLOOD, Nebraska RASHIDA TLAIB, Michigan
MICHAEL LAWLER, New York RITCHIE TORRES, New York
MONICA DE LA CRUZ, Texas NIKEMA WILLIAMS, Georgia
ANDREW OGLES, Tennessee BRITTANY PETTERSEN, Colorado
ZACHARY NUNN, Iowa CLEO FIELDS, Louisiana
LISA MCCLAIN, Michigan JANELLE BYNUM, Oregon
MARIA SALAZAR, Florida SAM LICCARDO, California
TROY DOWNING, Montana
MIKE HARIDOPOLOS, Florida
TIM MOORE, North Carolina
Ben Johnson, Staff Director
SUBCOMMITTEE ON NATIONAL SECURITY, ILLICIT FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS
WARREN DAVIDSON, Ohio, Chairman
ZACHARY NUNN, Iowa, Vice Chairman JOYCE BEATTY, Ohio, Ranking Member
FRANK D. LUCAS, Oklahoma JOSH GOTTHEIMER, New Jersey
PETE SESSIONS, Texas JUAN VARGAS, California
ANDY BARR, Kentucky BILL FOSTER, Illinois
ROGER WILLIAMS, Texas VICENTE GONZALEZ, Texas
YOUNG KIM, California RITCHIE TORRES, New York
ANDREW OGLES, Tennessee SEAN CASTEN, Illinois
LISA MCCLAIN, Michigan SAM LICCARDO, California
MARIA SALAZAR, Florida
(II)
C O N T E N T S
Tuesday, April 1, 2025
OPENING STATEMENTS
Page
Hon. Warren Davidson, Chairman of the Subcommittee on National Security,
Illicit Finance and International Financial Institutions, a U.S. Representa-
tive from Ohio ....................................................................................................... 1
Hon. Joyce Beatty, Ranking Member of the Subcommittee on National Secu-
rity, Illicit Finance and International Financial Institutions, a U.S. Rep-
resentative from Ohio .......................................................................................... 3
STATEMENTS
Hon. Maxine Waters, Ranking Member of the Financial Services Committee,
a U.S. Representative from California ............................................................... 4
WITNESSES
Mr. Darrin McLaughlin, Executive Vice President and Chief BSA/AML &
Sanctions Officer, Flagstar Bank, on behalf of the American Bankers Asso-
ciation (ABA) ........................................................................................................ 5
Prepared statement .......................................................................................... 7
Ms. Jacqueline Burns Koven, Head of Cyber Threat Intelligence, Chainalysis . 17
Prepared statement .......................................................................................... 19
Mr. Jeff Brabant, Vice President, Federal Government Relations, National
Federation of Independent Business (NFIB) ..................................................... 30
Prepared statement .......................................................................................... 32
Ms. Kathy Stokes, Director, Fraud Prevention Programs, on behalf of the
American Association of Retired Persons (AARP) ............................................. 38
Prepared statement .......................................................................................... 40
APPENDIX
MATERIALS SUBMITTED FOR THE RECORD
Hon. Maxine Waters:
Financial Accountability and Corporate Transparency (Fact) Coalition ..... 76
CFP Submissions:
CFP Board Letter ............................................................................................. 79
How to Protect Yourself Against Scams ......................................................... 81
Protecting Your Elderly Parent form Financial Fraud ................................. 85
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Representative Maxine
Waters
Ms. Jacqueline Burns Koven ........................................................................... 88
Ms. Kathy Stokes ............................................................................................. 90
LEGISLATION
H.R. 1799, the Financial Reporting Threshold Modernization Act ..................... 93
H.R. 425, the Repealing Big Brother Overreach Act ............................................ 96
H.R. ———, the Repealing Big Brother Overreach Act ....................................... 99
(III)
IV
Page
H.R. ———, the Guarding Unprotected Aging Retirees from Deception
(GUARD) Act ........................................................................................................ 101
H.R. ———, the Stop Foreign Scammers Act of 2025 .......................................... 112
H.R. ———, the Accountability through Confirmation Act ................................. 115
H.R. ———, the Bringing Real Accountability Via Enforcement (BRAVE)
in Burma Act ........................................................................................................ 117
H.R. ———, the Financial Access Improvements Act .......................................... 124
H.R. ———, the Foreign Affiliates Sharing Pilot Program Extension Act ......... 128
H.R. ———, the Kleptocracy Asset Recovery Rewards Program Act .................. 130
FOLLOWING THE MONEY: TOOLS AND
TECHNIQUES TO COMBAT FRAUD
Tuesday, April 1, 2025
U.S. HOUSE OF REPRESENTATIVES,
SUBCOMMITTEE ON NATIONAL SECURITY,
ILLICIT FINANCE, AND
INTERNATIONAL FINANCIAL INSTITUTIONS,
COMMITTEE ON FINANCIAL SERVICES,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:04 a.m., in room
2128, Rayburn House Office Building, Hon. Warren Davidson
[chairman of the subcommittee] presiding.
Present: Representatives Davidson, Lucas, Sessions, Williams of
Texas, Kim, Ogles, McClain, Salazar, Beatty, Vargas, Foster, Gon-
zalez, Casten, Liccardo, and Waters.
Chairman DAVIDSON. The Subcommittee on National Security, Il-
licit Finance, and International Financial Institutions will come to
order.
Without objection, the chairman is authorized to declare a recess
of the committee at any time.
The hearing is titled ‘‘Following the Money: Tools and Tech-
niques to Combat Fraud.’’
Without objection, all members will have 5 legislative days with-
in which to submit extraneous materials to the chairman for inclu-
sion in the record.
I now recognize myself for 5 minutes for an opening statement.
OPENING STATEMENT OF HON. WARREN DAVIDSON, CHAIR-
MAN OF THE SUBCOMMITTEE ON NATIONAL SECURITY, IL-
LICIT FINANCE AND INTERNATIONAL FINANCIAL INSTITU-
TIONS, A U.S. REPRESENTATIVE FROM OHIO
I want to welcome our witnesses. Thank you for participating in
our hearing today. It is devoted to analyzing investment fraud in
the United States and reassessing the effectiveness of tools used to
combat fraud in our financial system.
Earlier this month, the Federal Trade Commission reported that
U.S. consumers lost $5.7 billion to investment scams in 2024.
Criminals are increasingly finding ways to bypass U.S. financial
regulations in order to scam Americans into draining their life sav-
ings for the sake of the criminal’s illicit gain.
This type of organized fraud transcends both State lines and po-
litical divides. These scammers prey on everyday Americans, often
our most vulnerable senior citizens.
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The United States is supposed to have the world’s most capable
financial intelligence capabilities. We are focused in this com-
mittee, on national security issues, but we also need to use these
resources and capabilities we have more effectively to protect our
own citizens.
Safety and soundness are essential to preserving our own finan-
cial well-being. Beyond our own population, America’s capital mar-
kets are home to more than half of the world’s invested capital.
The U.S. dollar is the world’s reserve currency.
Since its enactment in 1970, the Bank Secrecy Act has served as
the cornerstone for U.S. anti-money laundering, counterterrorism,
financing, and Know Your Customer compliance measures for U.S.
financial institutions. The Bank Secrecy Act’s regulatory frame-
work is intended to defend and secure our financial system from
crime.
However, considering the ever-changing landscape of technology
and financial crime, we must continually assess the effectiveness of
the tools and techniques traditionally used to secure the financial
system.
Today we will take time to learn more about investment fraud
and how financial institutions, including blockchain analytics
firms, contribute to combatting this pervasive issue.
Investment fraud, as these losses grow in the United States, it
is important to consider changes that can be made to enhance the
effectiveness of our reporting.
Suspicious activity reports, or SARs, and currency transaction re-
ports, CTRs, are tools used by financial institutions to flag trans-
actions over a certain monetary value that could be related to illicit
activities. These reports are filed by financial institutions and
maintained by FinCEN, the Financial Crimes Enforcement Net-
work, and used by law enforcement agencies over the course of
their investigations.
The SAR is filed when a financial institution has a transaction
over $5,000, and a CTR is filed on cash transactions involving more
than $10,000.
Based on consumer price index (CPI) inflation, $10,000 in 1970
would be more than $81,000 today. These numbers in the reporting
requirements have never been adjusted for inflation, so the report-
ing burden keeps growing with no obvious improvement on the ef-
fectiveness of the reports.
FinCEN estimated that an average total of 12,600 SARs and
57,000 CTRs were filed each day. This is 2023 data.
According to a December 2024 Government Accountability Officer
(GAO) report, law enforcement agencies accessed only 5.4 percent
of those CTRs filed between 2014 and 2013—or 2023. You have a
10-year period there with data and only 5.4 percent. That is not
very efficient.
It is long overdue for Congress to consider these clearly outdated
thresholds and frameworks so that we can protect our people and
our financial institutions.
Even as we update old laws, it is important to consider other up-
dates. Thankfully, the Trump Administration has mooted the disas-
trous and unconstitutional Corporate Transparency Act requiring
businesses to report the beneficial ownership to FinCEN.
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Presumably, by the law’s framework, operating a business or
even a homeowners association means you are engaged in illicit fi-
nance, but our Constitution says that, when the government wants
to know private information, they need probable cause, at least rea-
sonable suspicion, to get a warrant or subpoena.
Surely, we can minimize the financial harm suffered by Ameri-
cans exploited by scammers without infringing on their civil lib-
erties or adding ways to make ordinary citizens criminals.
As we consider legislative solutions to maximize the effectiveness
of our financial intelligence architecture, I am hopeful that we will
increase and improve nationwide education on investment scams.
I am also hopeful that we will equip law enforcement agencies with
better tools to go after criminals that are continually operating un-
seen.
I look forward to the insights gained on this issue from today’s
hearing.
I yield back.
The chairman now recognizes the ranking member of the com-
mittee, Ms. Beatty, for 4 minutes for an opening statement.
OPENING STATEMENT OF HON. JOYCE BEATTY, RANKING
MEMBER OF THE SUBCOMMITTEE ON NATIONAL SECURITY,
ILLICIT FINANCE AND INTERNATIONAL FINANCIAL INSTITU-
TIONS, A U.S. REPRESENTATIVE FROM OHIO
Mrs. BEATTY. Thank you, Mr. Chairman and Ranking Member.
Good morning and thank you to our witnesses who are here
today and for holding this hearing.
I want to make sure that we understand today that we really
need to have this discussion to combat financial fraud, and it is no
secret. We have heard comments from our chair that fraud schemes
are on the rise, and the bad actors are now finding new and cre-
ative ways to defraud consumers.
For example, the Federal Trade Commission data showed us
that, in 2024, American consumers lost more than 12.5 million—
billion dollars to fraud, a 25 percent increase from the previous
year.
Our constituents in red and blue districts alike are being robbed
of their hard-earned savings, and I am eager to work with my Re-
publican colleagues to develop sharper tools to deter fraud, folks,
and protect American consumers, starting with today’s hearing.
Although I appreciate the bipartisan approach to tackling this
matter, we cannot ignore the stark contradictions between the goal
of today’s hearing and the Trump Administration’s roll back of key
financial crime measures that would help us detect and deter
fraud.
The President, along with Elon Musk’s Department of Govern-
ment Efficiency (DODGE) is trying to unlawfully eliminate the
Consumer Financial Probation Bureau (CFPB), the agency, as you
know, that is responsible for protecting Americans from fraud and
abuse. The President announced that the United States will no
longer enforce Foreign Corrupt Policy Practices Act—the Foreign
Corrupt Practices Act (FCPPA), which prohibits Americans from
bribing foreign officials. Also, the Treasury Secretary, Scott
Bessent, unilaterally announced that the Department will not be
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enforcing the bipartisan Corporate Transparency Act (CTA), which
President Trump signed into law during his first term, against U.S.
persons exempting over 99 percent of the companies Congress in-
tended the law to cover.
Gutting the CTA eliminates a critical tool for law enforcement to
detect and deter fraud cases that involve anonymous shell compa-
nies, effectively making the United States a haven for money
launderers, traffickers, and fraudsters.
Let me just give you an example. In 2022, six individuals were
charged with scamming over 20,000 victims by tricking them into
paying for tech repair services. Victims paid more than $10 million.
I am going to say that again: Victims paid more than $10 million
to bank accounts tied to a network of shell companies.
While I join my colleagues on the other side in calling out the
need for key beneficial ownership reforms, the administration re-
peatedly chooses to gut the law entirely instead of working in a bi-
partisan manner to ease small business compliance burdens.
In just 2 months, President Trump has made it easier for finan-
cial fraud to devastate hardworking families, particularly older
adults, by unlawfully dismantling the pillars of our financial crime
regulatory regime.
While I, again, appreciate this hearing, I hope the discussion
only underscores the vital significance of this regime and the need
to preserve it if we were truly, truly to prevent fraud and protect
our constituents.
Once again, to our witnesses, I hope that you can shed some
light on this, and I yield back.
Chairman DAVIDSON. I thank the gentlewoman.
I now recognize the ranking member of the full committee, Ms.
Waters, for 1 minute.
STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF
THE FINANCIAL SERVICES COMMITTEE, A U.S. REPRESENTA-
TIVE FROM CALIFORNIA
Ms. WATERS. Thank you, Chairman Davidson and Ranking Mem-
ber Beatty for convening this hearing on fraud.
U.S. fraud losses were estimated at nearly $13 billion in 2023,
but many think the actual amount is much higher. Especially for
the 100 million Americans over age 50, fraud is a serious threat
to their secure retirement and well-being.
Congress must take financial crime seriously. It must stand up
for the tools it has enacted, like the Bank Secrecy Act and Cor-
porate Transparency Act, to detect fraud and hold fraudsters ac-
countable.
Congress must stand up for the bank examiners, investigators,
prosecutors, agencies, and consumers that are under attack by the
Trump regime and his billionaire cabinet, and we must end
Trump’s own schemes to defraud the American public using his
meme coin and stablecoin.
I thank you and I yield back.
Chairman DAVIDSON. I thank the Ranking Member.
Today we welcome the testimony of: Mr. Darren McLaughlin, he
is the Executive Vice President and Chief BSA/AML (Bank Secrecy
Act/Anit-Money Laundering) and Sanctions Officer for Flagstar
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Bank in Michigan and is testifying on behalf of the American
Bankers Association (ABA); Ms. Jacqueline Burns Koven is the
Head of Cyber Threat Intelligence at Chainalysis; Mr. Jeff Brabant
is the Vice President for Federal Government Relations at the Na-
tional Federation of Independent Businesses (NFIB); and Ms.
Kathy Stokes is the Director of Fraud Prevention for the American
Association of Retired Persons (AARP).
We thank each of you for taking time to be here. Each of you will
be recognized for 5 minutes to give an oral presentation of your tes-
timony.
Without objection, your written statements will be made part of
the record.
Mr. McLaughlin, you are now recognized for 5 minutes for your
oral statement.
STATEMENT OF DARRIN MCLAUGHLIN, EXECUTIVE VICE
PRESIDENT AND CHIEF BSA/AML & SANCTIONS OFFICER, ON
BEHALF OF THE AMERICAN BANKERS ASSOCIATION
Mr. MCLAUGHLIN. Thank you, sir.
Thank you Chairman Davidson, Ranking Member Beatty, Rank-
ing Member Waters, and members of the subcommittee. Thank you
for the opportunity to testify.
My name is Darren McLaughlin, and I am the Executive Vice
President (EVP) and Chief BSA/AML Officer for Flagstar Bank
based in New York. I am testifying today on behalf of the American
Bankers Association. These views are my own and do not nec-
essarily reflect the views of my employer.
Criminal enterprises are targeting all Americans. One in three
adults have experienced financial fraud or a scam in just the last
12 months, while nearly two in five have experienced a financial
loss.
Bad actors have leveraged cutting-edge technology, social media,
and telecommunications to target American’s life savings. Through
increasingly sophisticated techniques, bad actors make false prom-
ises of huge financial returns on fictitious investment opportuni-
ties.
I represent the thousands of talented BSA and anti-fraud profes-
sionals across the country who have dedicated their entire careers
to protecting our customers and the U.S. financial system, but our
customers are still under attack.
To succeed, we need a more strategic approach that includes the
government, the banking industry, and other industries across the
economy. It is critical that the banking industry receive trans-
parent and actionable feedback from the government and impor-
tant regulatory reforms to let us focus on the real threats.
I would like to emphasize three things today. First, banks are
doing important work to combat fraud, including leveraging tech-
nology, continuously improving anti-fraud operations, and investing
in customer anti-fraud education, but a whole-of-government ap-
proach is needed.
Financial institutions across the country have implemented rig-
orous risk-based AML compliance and anti-fraud programs that
alert us to signs that customers have started to send money in un-
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usual patterns. Unfortunately, these customers sometimes fall vic-
tim to those overseas characters.
We can share heartbreaking stories across the industry about in-
nocent customers who have lost their lifetime savings to invest-
ment scams. As hard as we try, sometimes we cannot convince our
customers that they are the victim of a scam in progress.
Although we file suspicious activity reports with the Treasury’s
Financial Crimes Enforcement Network, by the time law enforce-
ment receives the report, it is often too late.
A major part of this threat comes from overseas, and these bad
actors are using new generative artificial intelligence (AI) tools to
increase the sophistication and effectiveness of their outreach.
There must be a better approach to tackling this grave problem.
Greater involvement by and coordination with the government is
essential.
Second, banks need timely, actionable and feedback from—ac-
tionable data and feedback from the government on priority
threats. The Federal Government has a database bursting with
threat information, which should be shared with the private sector.
Although thousands of SARs are filed, they may not actually re-
flect criminal or other illicit acts. It would help banks to see anal-
ysis of these reports and other information the government may
have about this illicit activity.
Finally, we need meaningful reforms of the BSA rules, including
creating a true risk-based approach to BSA/AML compliance, pro-
viding transparent government feedback to banks regarding pri-
ority threats, reform of outdated currency transaction reporting,
streamline and update the suspicious activity and other reporting
forums that we must complete, and increase collaboration between
bank regulators and the banks.
In conclusion, banks are working hard to combat fraud, but it is
clear our customers are still under attack. To fight back and suc-
ceed, we need a whole-of-government approach that includes great-
er transparency and actionable feedback from the government. We
need other sectors to do their part, and we need important regu-
latory reforms to let us focus on the real threats.
Chairman Davidson, Ranking Member Beatty, and Ranking
Member Waters, and members of the subcommittee, we are grate-
ful for your leadership and holding this hearing to highlight the ex-
traordinary and growing financial fraud problem that is plaguing
our country.
We look forward to working with you and your colleagues to ex-
plore what Congress, the regulatory agencies, and the Federal Gov-
ernment can do to help.
Thank you once again for the opportunity to testify, and I look
forward to answering your questions.
[The prepared statement of Mr. McLaughlin follows:]
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Chairman DAVIDSON. Thank you, Mr. McLaughlin.
Ms. Burns Koven, you are now recognized for 5 minutes for your
oral statement.
STATEMENT OF JACQUELINE BURNS KOVEN, HEAD OF CYBER
THREAT INTELLIGENCE, CHAINALYSIS
Ms. BURNS KOVEN. Chairman Davidson, Ranking Member
Beatty, Ranking Member Waters, and distinguished members of
the subcommittee, thank you for inviting me to testify before you
today on the pressing issue of fraud targeting Americans.
My name is Jacqueline Burns Koven, and I am the Head of
Cyber Threat Intelligence for the blockchain data platform
Chainalysis where we help make blockchain safer and more secure
so that financial institutions, businesses, and government can en-
gage cryptocurrency with confidence.
Leveraging the blockchain’s inherent transparency, we track
cryptocurrency activity by illicit actors, such as those engaged in
scams, and provide data on their financial activity to private and
public sector customers.
Today’s hearing shines an important spotlight on scams facing
the American people as a matter of national security, most notably,
so-called pig butchering scams, also referred to as investment or
confidence scams, that target and build relationships with individ-
uals, convincing them to invest in fraudulent opportunities.
Scan syndicates are well-resourced. According to Chainalysis
data, for each of the past 4 years, scam operators received over $10
billion in cryptocurrency payments, with 2024 estimated as a
record year.
It has never been easier for scammers to access tools to make the
con more convincing and scalable. The peer-to-peer marketplace,
Huione Guarantee, for example, has become a one stop shop for the
scam supply chain.
As we highlighted in our annual crypto crime report, Huione has
processed more than $70 billion in crypto transactions, and its in-
frastructure facilitates laundering services, as well as the sale of
contact information for outreach to potential scam victims, web-
hosting services, social media accounts, and AI software.
Fraudsters can always be counted on to abuse novel technologies
for their aims, but the utilization of cryptocurrency should fun-
damentally place scammers at a disadvantage.
Cryptocurrency transactions are inherently public, and the data
from those transactions is preserved on a transparent, immutable
ledger. In fact, Stablecoins, in particular, are freezable midstream,
which has led to spectacular seizures of scammed funds.
Blockchain intelligence provides insight into the entire scam sup-
ply chain, laundering patterns, and even to scale at a level unpar-
alleled to traditional finance. Indeed, a single cryptocurrency pay-
ment to a scam can often lead to identifying hundreds of other vic-
tim payments of a multimillion dollar fraud scheme, allowing for
a more effective disruption and restitution efforts rather than just
one-off criminal investigations.
However, the current reality is that scammers are exploiting the
siloed nature of how the public and private sector identify and re-
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spond to these schemes. Scammer syndicates are organized and
agile, and they are capitalizing on our visibility gaps.
Today scam victims have multiple State, local, and Federal agen-
cies they can report to, yet there is no easy mechanism for these
agencies to share with each other, let alone with the private sector
best positioned to prevent additional victims.
Financial institutions reporting on scams have no visibility into
the scams reported by their peers, leaving them unable to protect
their customers from scams known to the government or to the fi-
nancial institution next door.
At the same time, private sector entities outside of financial in-
stitutions on the frontline of scams lack the structures to com-
prehensibly share and receive information from the public sector
about scam activity that would allow them to take more proactive
measures.
It is essential to modernize and streamline bidirectional scam re-
porting and response between public and private sectors to facili-
tate restitution and the prevention of additional victims.
Furthermore, too often scam victims are turned away from local
authorities who are ill-equipped to properly assess crypto cases. We
must ensure law enforcement’s access to blockchain analysis and
training and invest in tech-driven efficiency to swiftly take action
with intelligence and seize funds.
Over the past 10 years, Chainalysis has supported hundreds of
cases involving the freezing of assets in partnership with govern-
ment agencies worldwide, helping to secure at least $12.6 billion
worth of illicit crypto. It is imperative that we develop strategies
to prevent Americans from falling prey to scams altogether.
Chainalysis acquired Alterya, which utilizes artificial intelligence
to identify early stage scam activities, enabling financial institu-
tions large-scale upstream detection. We further support a regu-
latory framework that clearly delineates responsibility for oversight
of businesses offering Stablecoins and trading services.
Finally, we need to close gaps in AML/Countering the Financing
of Terrorism (CFT) standards implementation. In the absence of co-
operation, more pressure is needed to disrupt financial networks,
define laws, and regulatory norms.
Thank you again for the opportunity to provide testimony on this
important topic. I am encouraged by the subcommittee’s interest,
and to that end, we invite Congress’ continued engagement on this
topic to combat scams and better protect Americans.
I look forward to your questions.
[The prepared statement of Ms. Burns Koven follows:]
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Chairman DAVIDSON. Thank you for that.
Mr. Brabant, you are now recognized for 5 minutes for your oral
statement.
STATEMENT OF JEFF BRABANT, VICE PRESIDENT, FEDERAL
GOVERNMENT RELATIONS, NATIONAL FEDERATION OF
INDEPENDENT BUSINESS
Mr. BRABANT. Chairman Davidson, Ranking Member Beatty,
Ranking Member Waters, and the members of the House Com-
mittee on Financial Services, thank you for allowing me to testify
before the committee today.
My name is Jeff Brabant, and I am the Vice President of Federal
Government Relations for the National Federation of Independent
Business.
NFIB is the voice of small business in Washington, DC, all 50
State capitals, and our Nation’s courts. We represent about 300,000
small business owners with the average NFIB member employing
about seven to eight people.
Data privacy is a significant concern for small business owners.
A prime example of this is the Corporate Transparency Act. Under
the CTA, small businesses with fewer than 20 employees and 5
million in revenue are required to report their beneficial ownership
information to the Financial Crimes Enforcement Network. This in-
cludes a scanned copy of a driver’s license or passport of every ben-
eficial owner.
Federal, State, local and international law enforcement and intel-
ligence agencies can access this information without a subpoena or
warrant. Small businesses fear their information will be targeted
by criminals, politically motivated individuals, or subject to
cyberattacks by our Nation’s adversaries that could expose their
personal information to actual criminals and nefarious actors.
Some small businesses have fallen victim to companies, which
may be scam operators, offering to file beneficial ownership infor-
mation (BOI) data. A recent search of ‘‘CTA BOI filing’’ on Google
demonstrates this problem.
Three sponsored BOI companies appear before the official
FinCEN result. One of these companies in particular, BOIR.org,
even uses an imitation government seal with an eagle on it to ap-
pear like an official seal that the U.S. Government would use.
Recently, an Indiana farmer contacted NFIB regarding one of
these scam companies. This farmer had begun the process to file
through a scam company but did not complete the filing. Still, this
farmer had $249 charged to his credit card. Now the farmer is
searching for a refund but likely will not get one.
Small businesses overwhelmingly oppose the CTA. Thankfully,
President Trump recognized the absurdity of beneficial ownership
information reporting requirements. He called the law invasive,
outrageous, and an economic menace. He could not be more right.
The ultimate irony is that a law that supporters claim is for na-
tional security has likely opened the U.S. economy, American citi-
zens, and small business owners to more data and privacy risk.
The Federal database will be breached. It will be hacked, and pri-
vate information will leak.
31
This is why Congress and Treasury must immediately and per-
manently delete the records of the millions of U.S. small business
owners who already filed their BOI with FinCEN. This is non-nego-
tiable. It has to be destroyed.
Let me be clear. The CTA is unconstitutional and should be over-
turned by the courts. Absent intervention from the courts, Con-
gress can clean this mess up by passing Chairman Davidson’s Re-
pealing Big Brother Overreach Act. This legislation will repeal the
CTA so a future administration could not revive or expand the stat-
ute.
Congress could also exempt law-abiding U.S. small businesses
from the CTA, as the Trump Administration has proposed.
Before I close, I would like to draw attention to the issue of inter-
net protocol (IP) and identity theft by fraudulent, as well as legiti-
mate Chinese businesses, such as Temu.
NFIB members have shared stories of how their popular Amer-
ican-made products are being stolen and ripped off by Chinese com-
panies. One of the more egregious examples is of the Illinois-based
and American-made Power Planter. Power Planter is a garden
auger manufacturer that works in standard cordless drills.
This small business has been the target of nonstop IP and iden-
tity theft by Chinese scammer companies. These companies will
copy and paste Power Planter’s copywritten images, verbiage, and
advertising imagery, including their Made in America claim, and
sell from China at a lower cost.
The Chinese product is of inferior quality, and, when it breaks,
consumers do not even realize it is from China and often complain
directly to Power Planter, even leaving negative comments on their
social media pages.
Power Planter has dedicated significant resources to try and stop
these scammers, but it is a full-time job. In fact, this small busi-
ness has been forced to retain counsel, whose job is to track rip-
off companies on sites like Amazon, Alibaba, and eBay, and report
them to the appropriate company for removal.
There have been instances where Power Planter’s counsel has re-
moved several thousand such imposters in a single month. The
process of getting the scam company taken down often takes sev-
eral attempts, and even then, there is often a remedial process
where they are allowed to begin selling again or another company
pops right back up. It is an endless game of Whac-A-Mole.
These fraudulent companies are taking money out of the pockets
of American businesses and workers.
Thank you for the opportunity to discuss the impact of scams
and fraud on small businesses, and I look forward to your ques-
tions.
[The prepared statement of Mr. Brabant follows:]
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Chairman DAVIDSON. Thank you, Mr. Brabant.
Ms. Stokes, you are now recognized for 5 minutes for your oral
statement.
STATEMENT OF KATHY STOKES, DIRECTOR OF FRAUD PRE-
VENTION PROGRAMS, AMERICAN ASSOCIATION OF RETIRED
PERSONS
Ms. STOKES. Thank you and good morning.
My name is Kathy Stokes, and I am the Director of Fraud Pre-
vention Programs for AARP. Thanks for inviting me to testify on
behalf of AARP at this important hearing.
This morning I am going to shed light on the true impact of
fraud, its potential to victimize anyone, and its significant threat
to national security.
Through the Fraud Watch Network, AARP educates older adults
on the risk that fraud poses to their financial security, meeting
them where they are. We have hundreds of volunteers that work
with our State offices and communities all over the country to help
older Americans avoid fraud.
We share information online, through newsletters, and to
podcasts, and we cover fraud in most editions of our publications
that tens of millions of Americans receive.
Our victim support program, including a help line receiving 500
calls daily, and support groups that address fraud’s emotional im-
pact helps people like Dave, who lost family and friends and con-
templated suicide after having his home and his business stolen
from him through a romance scam.
The recent growth in fraud has been meteoric, but the Federal
Trade Commission (FTC) estimates underreporting, suggesting real
fraud losses in 2023 were not the reported $10.4 billion but $158.3
billion.
Criminals do not discriminate on who they target, but when
older adults are victimized, the financial impact can be cata-
strophic. These people are financially ruined. They experience emo-
tional and health impacts. Often their families are torn apart, and
many once financially secure Americans who did the right thing
and saved for a comfortable retirement are left to rely on govern-
ment safety nets.
In my written testimony, I describe how the sophistication and
scale of today’s transnational crime rings have led to them becom-
ing a national security threat. These enterprises leverage a vast
array of tools to commit their crimes, including all methods of com-
munication and forms of payment, complex impersonation schemes,
anonymous shell companies, human trafficking, and more.
Take the Jalisco New Generation Cartel in Mexico. It is using
scams to fund things like sending meth and fentanyl across our
southern border or take the massive explosion of financial groom-
ing schemes, the origins of which are Chinese organized crime in
Southeast Asia. Their goal is to cripple the U.S. economy.
The reason scams succeed beyond sophistication and scale relies
on how our brains work. Criminals know that they can force our
brains to bypass logic by getting targets into a heightened emo-
tional state. Criminals call it getting targets under the ether, and
academics have shed light on the actual science behind it.
39
Linda, a professor, shared her story with AARP about the day
her life was turned upside down when a tech support scam that
started with a fear-inducing computer pop-up message led to a 4
and a half month nightmare that forced her retirement and saw
her buying gold bars and putting them into a stranger’s car. When
she realized the crime, she said it was like the walls of her house
blew down.
Now, there is no single solution to the fraud crisis. It will take
a whole-of-society approach. For individuals, it is things like better
protecting ourselves, freezing our credit, using password managers
and multifactor authentication.
For educators, it is focusing on the red flags that are important
but so is training on how most scams come at to us and what to
do when they do.
For industry, financial institutions must continue to innovate on
fraud mitigation. Tech companies must build safety and security
into product design and manufacturing.
Telcos must find a way for stopping the scams over the networks
from reaching Americans, and industry and law enforcement must
work together.
AARP is a founder of a new public-private partnership called The
National Elder Fraud Coordination Center, and we will enhance
the ability for private industry and the public space to work to-
gether to begin to solve elder fraud crimes.
At AARP, we are looking forward to working with policymakers
to address fraud by supporting resources for State and local law en-
forcement: to hire and train staff and secure tools that combat the
fraud crimes; to improve fraud reporting systems so law enforce-
ment can prioritize cases; to reinstate the casualty and theft loss
deduction to address the taxation of stolen assets; support legisla-
tion to limit the damage of crypto ATMs; and support the National
Elder Fraud Coordination Center. You can learn more about that
at fightelderfraud.org.
Thank you.
[The prepared statement of Ms. Stokes follows:]
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Chairman DAVIDSON. Thank you.
I really appreciate all our witnesses. We learned a lot just from
your opening statements, and, wow, what a challenge.
We will now turn to member questions.
I now recognize myself for 5 minutes of questioning.
Mr. McLaughlin, based on your 27 years of experience, have you
seen an expansion in the efforts to stop fraud?
Mr. MCLAUGHLIN. Thank you for your question, Chairman.
Over 27 years, yes, there has been a huge, huge, emphasis on
protecting our customers in the industry. We have tackled this via
enhancing our education programs, via workshops in our branches,
educational material posted on our websites——
Chairman DAVIDSON. So your own efforts in the industry, but
also you have seen more regulatory pressure to disclose and report,
correct?
Mr. MCLAUGHLIN. Correct, yes. The increased significance or
pressure placed on financial institutions to identify and report sus-
picious activity and fraud has grown over the course of the last 27
years.
Chairman DAVIDSON. Has the number of fraud cases and the size
and scope of the fraud also increased?
Mr. MCLAUGHLIN. Yes, sir.
Chairman DAVIDSON. In a way, it is like, well, in spite of our ef-
fort, we have not really stopped it. We have not necessarily shrunk
it either.
Some would say, ‘‘Well, gosh, imagine how bad it would be if we
had not been doing these things.’’ On the other hand, maybe the
way we are going about it is not working.
Could you highlight what you think works and what maybe could
be done more effectively from your experience.
Mr. MCLAUGHLIN. Thank you again.
From my experience, what has been working is the increased in-
vestment within the public sector in education, in advanced tech-
nologies to catch the fraud at the front door, as we call it, before
they are able to transact with the institutions. Also, advancements
in the models and scenarios for which we monitor customer behav-
ior once that account is established.
What we could be doing better, I would say, is establishing that
relationship, that public-private relationship, where there is a flow
of information back and between the government and the regulated
financial institutions that I represent.
The government sits on a mountain of data from the hundreds
of thousands of SARs that are filed and CTRs that are filed, as well
as the prosecutions that law enforcement——
Chairman DAVIDSON. Do they normally get back to you? Here is
a case: I was working on the Weaponization Committee last Con-
gress. One bank was asked by the Federal Bureau of Investigation
(FBI) to report on their customers, and the bank said, ‘‘We need a
warrant or subpoena.’’ Then the FBI came back and said, ‘‘Well,
why do you not generate a suspicious activity report,’’ where none
had previously existed.
Is that kind of interaction with law enforcement normal?
Mr. MCLAUGHLIN. Yes. The financial services and the financial
institutions that I have had the honor of working for do have good
50
relationships with law enforcement. However, to protect the laws
and the regulations that the financial institutions fall under, we do
often, after conversations with law enforcement, request the sub-
poena to turn over information.
Now, it is unusual to receive that type of conversation where a
SAR was not filed, but usually once the SAR is filed, outreach be-
gins, and conversations and flow of data start happening.
Chairman DAVIDSON. Thank you for that.
I look forward to working with you all and my colleagues to
make our system more effective.
I just want to highlight Mr. Brabant. I appreciate your testimony
because not only are individuals being scammed, but businesses
are and especially small businesses.
You referenced a bill, the Repealing Big Brother Overreach Act.
It has 133 House cosponsors and identical legislation sponsored by
Senator Tuberville in the Senate.
The change that you referenced that the Trump Administration
has done by focusing beneficial ownership reporting requirements
on foreign entities, is that an improvement for American citizens?
Mr. BRABANT. I think absolutely an improvement for American
citizens and an improvement for American small businesses. When
you are looking at 32.6 million reports FinCEN was expecting in
year one, that is not a risk-based approach, that is a needle-in-a-
haystack approach. When you refine it down to a smaller, more
risk-based approach, it should be a win.
Chairman DAVIDSON. I appreciate you also referencing to what
we need to do with the existing data, so thank you for that.
Ms. Stokes, I really appreciate your emphasis on seniors and the
great work you have done to educate seniors.
Working with our county prosecutors, do you have a way to roll
that toolkit out through member offices, so we make sure that our
county prosecutors who are on the frontlines—they often feel un-
supported by Federal resources.
In your experience, in what you are seeing, are these like lone
actors trying to scam people or is it sort of an organized crime ef-
fort that is hitting individuals and businesses?
Ms. STOKES. Thank you for that question, Representative.
For a long time, we have all held this assumption that the
fraudster is some guy in his mom’s basement making phone calls
and lurking on social media. I am sure those guys are still out
there, but they are not the ones that are causing the majority of
the problems.
This is transnational——
Chairman DAVIDSON. Thank you. I wish I had longer, but my
time has expired. I hope you can respond in writing. Sorry I did
not leave you enough time there.
My time has expired, and I now recognize the ranking member
of the subcommittee, Ms. Beatty, for 5 minutes for questions.
Mrs. BEATTY. Thank you, Mr. Chairman.
I will continue with Ms. Stokes.
I think we all touched on this earlier, but I would like to go a
little deeper into it. The bipartisan Corporate Transparency Act, as
you know, was created to prevent bad actors from hiding behind
anonymous shell companies. Can you clearly lay out for us how
51
this relates to fraud prevention and how the CTA and the bene-
ficial ownership database would be a critical fraud prevention tool?
Ms. STOKES. Thank you, Representative Beatty, for that ques-
tion.
I think that—I have a lot of opportunities to interact with law
enforcement, financial crimes investigators, and I understand from
them how critical information is and will help them get to the bot-
tom of the cases. Anything that takes away from that would be a
challenge.
The tools that criminals use are vast. They are complex imper-
sonation schemes and fake websites, shell companies, and human
trafficking. There are so many crimes within this crime.
Mrs. BEATTY. Maybe you can answer this as a follow-up. Can you
address how Treasury’s recent decision to exempt more than 99
percent of the companies that Congress intended to cover will
weaken our fraud prevention efforts?
Ms. STOKES. Thank you, Representative.
I can say that anything that is going to reduce information that
can be actionable by law enforcement from our perspective when it
comes to fraud that is a crisis, is very problematic.
Mrs. BEATTY. Okay.
Mr. McLaughlin, let me ask you this. It has been mentioned sev-
eral times already this morning that fraud is rapidly on the rise,
by you, by my colleagues. Each year American consumers, as we
know, are reporting significantly greater financial losses to scams,
and we clearly need to take, I believe, a whole-of-government ap-
proach to tackling this problem.
I understand that there are several Federal and State and local
organizations that play various roles in addressing fraud, but there
is currently no one central location for fraud victims to seek help.
Can you shed some light on or explain the current disjointed
framework and any suggestions you would have for us in Congress
that we could instate a streamlined, user-friendly process for fraud
victims to report these crimes to?
Mr. MCLAUGHLIN. Thank you for your question, Ranking Mem-
ber.
Currently, in the industry, we work with several not-for-profits
that focus on this, including AARP and other well-established
fraud, anti-fraud groups. At the local, State and Federal law en-
forcement level, we also interact because we all believe that this is
something that is growing and that we need to tackle.
There are working groups that are established. There are con-
ferences that are held where idea-sharing occurs. There is also a
greater need for transparency in the actual anti-fraud movement.
When financial institutions in the public sector file suspicious ac-
tivity reports or file with adult protective services when it comes
to elder exploitation, there is very little time we get feedback on
the information that we provided to see if it was actionable for
those agencies.
The sharing of knowledge back and forth would allow us to actu-
ally target specific threats to our customers and our population.
Centralizing a fraud group within law enforcement or a regulatory
agency would give our customers a central point of contact but also
52
allow the financial institutions as well to have a central point of
contact to continuously build upon the programs that we have.
Ms. BEATTY. Okay.
I might have enough time for either one of you to give us any
insight on how fraudsters are using social media platforms to lure
victims in.
Ms. Stokes? Mr. McLaughlin? Anything on that?
Ms. STOKES. Thank you for that question.
Yes, social media is one of the biggest vectors for fraud, and we
see so much harm coming from them. Yet, we do not see a con-
certed effort to take down the social media profiles that are there
and are known to be related to scams, and a lot more needs to be
done by that industry to——
Ms. BEATTY. My time is almost up. Yes, or no? Is that something
that Congress should be looking into, you believe?
Ms. STOKES. Yes.
Mrs. BEATTY. Okay. Thank you.
Chairman DAVIDSON. Thank you.
The gentleman from Oklahoma, also the Chairman of the Task
Force on Monetary Policy, Mr. Lucas, is now recognized for 5 min-
utes.
Mr. LUCAS. Thank you for holding this hearing, Mr. Chairman.
Thank you to our witnesses for testifying today.
In my regular meetings with bankers across my home State, the
issue of fraud is one that often comes up. They are on the ground.
They are seeing the people in their community being taken advan-
tage of.
It is unfortunate then that, oftentimes, Federal agencies place re-
porting burdens on our financial institutions rather than trying to
get at the root of the problem.
Mr. McLaughlin, how does it affect your communities, our com-
munities, I should say, when our credit providers have to spend all
their time complying with what some might define as burdensome
reporting requirements?
Mr. MCLAUGHLIN. We have finite resources available to us with-
in the public financial institution sector. When increased burden is
placed on us, we have to make certain risk-based decisions as to
where to deploy those resources, where to spend money, on our in-
vestments in technology and other operational efficiencies that we
can garner to continuously focus on the mission of catching as
many bad guys as we possibly can.
When we get more burden in terms of more checkbox exercises,
that just means we have to expend more resources to tackle the
job.
Mr. LUCAS. If I could follow up on that question.
Oftentimes, our credit providers are the first to notice when
something goes wrong. I recently met with bankers again in my
district that told me countless stories of how they were able to
identify fraudulent activities and protect their customers.
Bankers are allies in detecting fraud, but they are not respon-
sible for enforcing the law, and they should not be asked to do so
by the Federal Government.
Mr. McLaughlin, could you expand on how we could support our
financial institutions that are targeted by these crimes?
53
Mr. MCLAUGHLIN. I am going to go back to—and thank you for
your question.
I am going to go back to the transparency between local, State,
Federal law enforcement, regulatory agencies, and FinCEN.
The access to data and allowing these smart individuals that we
have working for us and data scientists across all sectors, allowing
us to analyze the data to focus on the threat at hand instead of
having us focus on check-the-box exercises that many financial in-
stitutions face today would be a huge step forward.
Mr. LUCAS. Turning to you, Mr. Brabant, I have heard again
from a number of my small businesses across Oklahoma that are
worried about the increased administrative burden that many re-
porting requirements place on them.
Small businesses, by definition, have fewer resources to devote to
these lengthy and elaborate reporting regimes. Can you talk about
the harms of overly broad reporting mechanisms?
How does rulemaking like the previous administration’s rule on
beneficial ownership, actually hurt our efforts to stop fraud?
Mr. BRABANT. Yes. When something is overly broad, it is ex-
tremely challenging. For example, you have the ‘‘substantial con-
trol’’ prong in the definition, which is essentially defined as ‘‘sub-
stantial control.’’
The previous administration defined it so broadly to be senior
staff. If you are a restaurant manager and you have no ownership
stake, you probably have substantial control.
One of the challenges when you are a small business owner is,
well, what senior staff do I have to put in? FinCEN does not clearly
define this. You are worried about going to jail for 10 years because
you might not have put enough senior staffers in. It is a real chal-
lenge.
Then you have to ask yourself how pertinent is this information
that is being reported that has sometimes just staff out there with
no ownership control at all.
Mr. LUCAS. Ms. Burns Koven, you have worked in this industry
from various vantage points and have seen the ebbs and flows of
the financial crime operators. What trends are you seeing today in
financial fraud and how can we, perhaps, try to get ahead of this
industry, so to speak?
Ms. BURNS KOVEN. Thank you for that question.
I think we have seen broadly that illicit actors of all stripes,
whether that be fraudsters, drug traffickers, are using jurisdictions
with weak AML/CFT standards. They are looking for those paths
of least resistance.
In closing those gaps, in capacity building or even applying pres-
sures to jurisdictions willingly being blind to the use of their plat-
forms for laundering, we can better identify and prevent these il-
licit actors from reaping the rewards of their activities.
Mr. LUCAS. Mr. Chairman, let me simply say, in closing, cus-
tomers are feeling it. Financial institutions are feeling it.
Fraudsters do not discriminate when it comes to who they steal
from, and we need to focus on that problem and give our law en-
forcement tools it needs to stop these criminals rather than just
more paperwork.
Thank you, Mr. Chairman.
54
I yield back.
Chairman DAVIDSON. I thank the gentleman.
The gentlewoman from California, also the ranking member of
the full committee, Ms. Waters, is now recognized for 5 minutes.
Ms. WATERS. Thank you very much, Mr. Chairman, and mem-
bers.
I am about to ask a question about a particular situation in this
country that is hardly believable, but I am pleased that we are
here talking about following the money, tools and techniques to
combat fraud.
Here is some money I want us to follow.
Ms. Stokes, days before Donald Trump took office, he introduced
the meme coin dedicated, of course, to himself. While the entities
behind his Trump meme coin earned nearly $100 million in trading
fees in less than 2 weeks, hundreds of thousands of small traders
suffered $2 billion in losses over the same timeframe.
Days after he released his coin, Melania Trump issued her own
coin. The many concerns about this are not only that the Trump
family profits or how this venture has become the biggest compo-
nent of the President’s personal wealth, more than even the real
estate for which he is known. It raises questions about the use of
cryptocurrency, including meme coins to entice, to police, to de-
fraud people out of their hard-earned savings.
Further, at the same time that Donald Trump is offering his
meme coin and other cryptocurrency products to enrich himself, his
regime is considering the rules that will define how cryptocurrency
is regulated. They are in charge.
It also comes at a time when Trump and Republicans are work-
ing hard to lower, even to remove, barriers to fraud and financial
crime.
As an expert in fraud prevention, how do criminals use
cryptocurrency to commit fraud, especially that which targets older
Americans? Why is cryptocurrency so attractive to bad guys and
how do the perpetrators, such as transnational criminal organiza-
tions, make crypto appealing to the victim?
By the way, not only has the President created this coin, meme
coin, he is also involved with the company on Stablecoins—because
we are negotiating Stablecoins right now. In the middle of our ne-
gotiations, he is creating his own company on Stablecoins.
What is going on?
Ms. STOKES. Thank you for that question, Representative
Waters.
I do know that when cryptocurrency is in the news, the criminals
follow. This does create tremendous opportunity because generally
everyday Americans do not really understand what crypto is. They
do not understand that its value is simply based on supply and de-
mand, so the investments can seem really attractive.
We are seeing two ways that crypto is showing up in the fraud
space. One is crypto investment schemes where people are having
everything stolen from them. That is the goal of the criminals, to
steal every penny from every victim.
The other is the use of crypto ATM machines. You have probably
seen 12,000 of them around the country. They are in big businesses
and grocery stores. The criminals are convincing the victim of an
55
urgent matter that they have to address, and they have to go to
the bank. They take out wads of cash, then they walk over to these
crypto ATM machines, and they put a hundred dollars at a time
into these machines, taking sometimes hours, which is a risk in
and of itself. Then they send the money to those who they think
are going to help them, and it goes into the wallet of a criminal.
Ms. WATERS. Wow. Well, thank you. Let me move on.
We know that anonymous shell companies are common tools
used by fraudsters to facilitate their crimes and to launder the pro-
ceeds of their bad act.
For example, two Chinese nationals were arrested for allegedly
leading a scheme to launder 73 million in proceeds from
cryptocurrency investment scams. The victims transferred millions
of dollars to U.S. bank accounts opened in the names of over 70
U.S. shell companies whose apparent purpose was to launder the
proceeds of the fraud.
Similarly, the leader of a large-scale time share resale scam was
sentenced to prison for defrauding more than 1,000 victims, many
of them elderly, out of their millions, using a network of fake front
companies in cities across the country.
These examples abound, and I would like to submit for the
record a fact sheet from the Transparency International U.S. that
describes how these corporate entities registered in the United
States are abused for a range of fraudulent purposes.
The Trump regime, with the help of my colleagues across the
aisle, are trying to make such fraud schemes easier by gutting the
Corporate Transparency Act, which helps the government combat
who——
Chairman DAVIDSON. The gentlewoman’s time has expired.
Ms. WATERS [continuing]. truly owns these shell companies.
Enough, enough, enough.
I know I do not have any more time.
I yield back.
Chairman DAVIDSON. Without objection, I will accept the gentle-
woman’s submission without objection.
[The information referred to can be found in the appendix.]
Chairman DAVIDSON. The gentleman from Texas, Mr. Sessions,
is now recognized for 5 minutes.
Mr. SESSIONS. Mr. Chairman, thank you very much.
Before we go too far, I want to acknowledge the gentleman, Hon.
Jack Fields, former member of our Texas delegation who was the
Ranking Member of Energy and Commerce when he retired in
1996, is with us today.
Mr. Fields, I want to thank you. You have been a guardian of
moving America forward for a long time, and I think, as you watch
what is going on and have since you have left, you have seen where
the things that developed also have a downside to them, an under-
belly that we are speaking about today.
I want to, if I can, go to anybody on the panel. I have heard—
I have read the testimony and also the things which we have pre-
pared Mr. Davidson’s great staff about, the overview. Increasingly,
what comes out today is we have a problem, and I think we have
seen and heard this.
56
What has Federal law enforcement done to mirror up to try and
stop this?
I know there are working groups. We heard there is a national
elder fraud, a task force you are trying to gather together as an in-
dustry.
Who is—What agency is the lead that you would look to?
Anybody.
Mr. MCLAUGHLIN. I will take the first stab at that.
Thank you for your question, sir.
From a financial institution standpoint, we would interact with
local or Federal agencies within the State that we found fraud.
Mr. SESSIONS. Can you name that? In other words, I know that
the Securities Exchange Commission (SEC) or Financial Industry
Regulatory Authority (FINRA) has jurisdiction over looking at
transactions and data information. When you have something that
you considered to be a crime, who do you look for? Who is the lead
agency?
Mr. MCLAUGHLIN. Again, thank you for your question.
It depends on the fraud that we are seeing. If we are seeing
checks or financial fraud, we would contact the Secret Service in
some cases because they sit within the Department of Treasury
and have that exposure.
If we are talking about elder abuse, financial exploitation, we
would reach out to Adult Protective Services (APS) and/or the FBI
within the city or State that the crime is taking place.
Mr. SESSIONS. Have we, as Members of Congress, through the
law, made it clear to not just consumers but really the industry
about who—have we streamlined that? Do you know who to go to
in a given circumstance?
Ms. BURNS KOVEN. Thank you for the question.
I think more can be done to streamline reporting and modernize
it so that we can connect the dots from a one-off investigation to
understanding that entire scheme so that we can actually increase
recovery and restitution and make more victims whole.
We have had spectacular seizures by U.S. Government of
cryptocurrency assets. Chainalysis has worked with governments
around the world seizing over $12.6 billion worth of illicit crypto.
More needs to be done to upskill and train at the State and local
level to ensure those departments that are the first line of response
oftentimes for victims are well equipped to understand and act
quickly to pursue these cases and seize those funds.
Mr. SESSIONS. I am well aware that many U.S. attorneys and
other agencies within law enforcement want to look at minimums.
It is not big enough for them until it gets to a certain stature, and
I have heard testimony, which I believe is true, unless you go and
plug a circumstance and challenge someone, they are going to con-
tinue these things.
I think that it is important that what the chairman is doing
here. That we do pass his piece of legislation that I received yester-
day, but we also have to have that translate to the Department of
Justice, to law enforcement that actually we honor them and ask
them to please understand more about this.
I think, as they look at the crime, they also see what might be
called MOs, method of operations, of how people do this. Then the
57
feedback comes to you, which was talked about. We fill out these
reports, and we do not hear anything back. We are not sure wheth-
er what we are providing is enough information, whether it was
specific information.
I think some success stories would go a long way to do that. I
think that I would love to have this subcommittee delve into that
angle of what we need to do better to incent law enforcement to
want to do that, whether it is us paying attention or gathering
things together.
I want to thank you, Warren, for doing this hearing. I think it
is most instructive about our job as Members of Congress to warn
people, in particular seniors.
I yield back my time, Chairman.
Chairman DAVIDSON. I thank the gentleman.
The gentleman from California, who is also the Ranking Member
of the Task Force on Monetary Policy, Mr. Vargas, is now recog-
nized for 5 minutes.
Mr. VARGAS. Thank you very much, Mr. Chairman, and thank
you for holding this hearing.
I also thank the ranking member and the witnesses. Thank you
for being here. I think it has been very, very informative.
I do have to call out, though, right at the beginning, when a lot
of my colleagues on the other side like to talk about unconstitution-
ality or illegal acts. It is funny that none of them seem to call out
the executive orders of President Trump.
In fact, interestingly, a Republican-appointed judge, Judge John
Coughenour said this, ‘‘that one of the orders is blatantly unconsti-
tutional.’’ He says, ‘‘I have a difficulty understanding how a mem-
ber of the bar could State unequivocally that this is a constitutional
order. It boggles the mind.’’
Again, I think it is important to call that out because I know we
have heard time and time again since I have been here the CFPB
is an illegal bureau. It went all the way to the Supreme Court. Cer-
tainly, the Supreme Court did not agree with my colleagues. I
think that has to be called, so I call it out.
I do want to ask this. There seems to be a contradiction in what
some of you have been saying today. It is interesting. If you listen
to what some of you said, you said, ‘‘The government has a whole
bunch of information, and they ought to give it to us, and some-
times in real time so we can help them solve this fraud problem.’’
Then I heard somebody else saying, ‘‘The government has too
much information, and this information, in fact, could be hacked
and then that would be very detrimental to us.’’
It seems that is what I heard. Did I not hear that?
Let me go first to Mr. Brabant. It sounded to me like you were
saying you are not confident with some of the information the gov-
ernment holds.
Mr. BRABANT. Absolutely. If—the beneficial ownership informa-
tion database going forward have 32—over 32 million driver’s li-
cense photocopies of small business owners, which would make it
a hacker’s dream to get that information, from an identify perspec-
tive.
Mr. VARGAS. Right. In fact, we see right now a lot of the com-
plaints that we are getting about DOGE is they are trying to get
58
into people’s private information that no one knows why they need
it. Then it seems—and not for a negative purpose, you guys want
to stop fraud, but it seems like you are saying the Federal Govern-
ment has a whole bunch of information, and we would like to have
it in real time so we can stop this fraud. Well, it seems like it po-
tentially could be a massive invasion of privacy. How do you rec-
oncile that? Yes.
Mr. MCLAUGHLIN. Thank you for the question. The folks that I
represent, the thousands of dedicated anti-money-laundering and
fraud professionals care for our customers’ data just as much as ev-
erybody else in the industry. However, we have a responsibility to
our customers to collect data and collect illicit threats on our cus-
tomers to do things like transaction monitoring.
Mr. VARGAS. No one disagrees with that, and I have to tell you,
I come from the perspective that I think banks try to do the right
thing with this information. I do not think they want their clients
to be defrauded. I do not believe that at all. I think you guys are
trying hard, but I also—I am not one of these guys who think the
government is the bad people either. I think the government at-
tempts to do the right things, too. Sometimes it falters like any-
thing else.
It does seem like you are asking for a lot of information, private
information that a lot of people would have a problem with you
having. In fact, I am kind of surprised my colleagues on the other
side did not call that out. They are usually pretty good about this
privacy stuff. It seems like you are saying, ‘‘Hey, give us a whole
bunch of this information back.’’ Is there not a conflict there.
Mr. MCLAUGHLIN. Again, thank you for the question. It is not a
conflict from the financial crimes’ perspective. We as financial insti-
tutions collect a lot of sensitive information on our customers al-
ready to establish a reasonable belief in that customer’s identity.
The information I am looking for, and the folks in my industry
are looking to partner with, is a secure transmission of information
that has been used in a financial crime outside of the institution
that we are employed by.
Mr. VARGAS. No. I get that. I get that. The government has a lot
of information, and you would like some of that, too. I do not know,
it seems to me that it could be a massive invasion of privacy. I am
surprised that my colleagues on the other side have not called it
out.
I do want to say one thing. You talked about the financial fraud
with the farmer. When the CFPB was still in order, we could still
go after that. In fact, right now, when they are calling about fraud,
no one answers the damn phone.
We have elderly people, we have people in the military, veterans
in San Diego that call the CFPB, and there is nobody on the other
side of the line, and that is a problem.
With that, I yield back.
Chairman DAVIDSON. I thank the gentleman.
The gentleman from Texas, also the Chairman of the Small Busi-
ness Committee, Mr. Williams, is now recognized for 5 minutes.
Mr. WILLIAMS of Texas. Thank you, Mr. Chairman, and thanks
to the witnesses for being here.
59
Ms. Burns Koven, we are seeing an evolution in how fraud is
committed and concealed, particularly through the use of emerging
technologies like decentralized exchanges and cryptocurrencies.
These tools are not only being exploited by traditional scammers
behind investment funds and pig butchering schemes but increas-
ingly by sophisticated transnational criminal organizations, includ-
ing Mexican drug cartels that are adapting their tactics to evade
the detection.
In many cases, these groups are bleeding fraud proceeds with
other illicit revenue streams and using crypto infrastructure to ob-
scure the origin and flow of funds.
Now, from your vantage, what trends are you seeing in how
fraudsters, both individual and organized, are using these tech-
nologies to evade AML controls, and how is your organization
working with the private sector and law enforcement to stay ahead
of these evolving threats and ensure that we can continue to track
down these criminals effectively.
Ms. BURNS KOVEN. Thank you for the question. We are able to
track these cartels purchasing fentanyl precursors from Chinese
dealers who are primarily operating in cryptocurrency. We are see-
ing illicit actors adopt cryptocurrency for the same reason it is
being used for legitimate purposes, because it is stable; it is liquid,
fast. Any technology, we can count on fraudsters to abuse. Luckily,
we have been able to track some of these fentanyl dealers and
Mexican cartels, but they are early stage in cryptocurrency, and
they are not expert launderers, which provides excellent oppor-
tunity for intervention.
I want to highlight the Eastern District of Wisconsin for for-
feiting $5.5 million in cryptocurrency associated with cartels and
Chinese fentanyl precursor dealers.
There are a number of cases where we see this over and over at
the Federal and State and local level, and we need to make sure
that the State and local investigators are equipped to be able to
identify and track these payments.
Mr. WILLIAMS of Texas. Thank you. One particular area of con-
cern of mine is how government-related reporting requirements,
such as FinCEN’s beneficial ownership information rule, may be
putting small businesses at, and their owners, at risk.
The rollout of BOI reporting under the Corporate Transparency
Act has required millions of small businesses to navigate a complex
new Federal compliance system, often for the first time.
Unfortunately, bad actors are using the requirements of the rule
to exploit business owners to—emails, fraudulent websites, and
scam calls impersonating FinCEN.
I applaud the Trump Administration for scaling back its harmful
requirement recognizing this approach a burden and security risk
that rule—that this rule has placed on small businesses, but there
are still bad actors we must protect small businesses and entre-
preneurs from.
Mr. Brabant, how has FinCEN BOI reporting requirements
opened up small businesses to the threat of fraud and scams, and
how can Congress better protect small business owners from BOI-
related fraud.
Mr. BRABANT. Thank you, Congressman.
60
The first one I discussed earlier is filing scams themselves. When
you do a Google search, the first several results are not going to
be from FinCEN. They are going to be from BOIR.org, who have
what looks like a government seal with an eagle in it.
Some of these sites are charging $400 to file, and then small
business owners have no idea if their information is actually being
filed.
Then, of course, there is the question of when you have your—
a copy of your driver’s license in a data base and there are tens
of millions of driver’s licenses in there, it is only a matter of time
until that information is leaked or hacked, and that opens up sig-
nificant identity theft risks.
Mr. WILLIAMS of Texas. Thank you. I have limited time but, Mr.
McLaughlin, could you elaborate on how the current filing burden
of SARs and CTRs are affecting community banks, and how Con-
gress can provide financial institutions with some relief from these
burdens while still giving law enforcement the information and
tools that they need.
Mr. MCLAUGHLIN. Thank you for your question. I think the bur-
den needs to be shifted to a risk-based approach that is an align-
ment between regulatory agencies, law enforcement, and then the
financial institutions.
Check-the-box exercises are a drain on resources across the in-
dustry, and it is demoralizing to the institution, the folks that I
represent that we are not focusing on the threat, the real threat
to our customers, but, rather, we are taking part in check-the-box
exercises to get the machine of filing SARs or CTRs out within the
regulatory expected SLEs.
Mr. WILLIAMS of Texas. Thank you. I yield my time back, Mr.
Chairman.
Chairman DAVIDSON. Thank you, gentleman.
The gentleman from Illinois, who is the Ranking Member of the
Financial Institution Subcommittee, Mr. Foster, is now recognized
for 5 minutes.
Mr. FOSTER. Thank you, Mr. Chair and to our witnesses. I would
like to talk a little bit about identity fraud and particularly the role
of digital identity systems and maybe ameliorating some of that.
States like Louisiana are using digital driver’s license to keep kids
off porn websites, things like that.
I guess my first question, Ms. Stokes, what fraction of the fraud
that is really at some point against seniors involve identity fraud,
where someone is representing themselves online as someone who
they are not?
Ms. STOKES. Thank you for that question, Representative. It kind
of goes two ways. Identities that have been stolen and used fraudu-
lently can be used for a whole range of things. When we are talking
about what is happening online, people do not need a stolen iden-
tity to pretend who they are. I mean, it is too easy. You can cre-
ate——
Mr. FOSTER. I guess the question is, is that, if it became sort of
standard practice when someone contacts you, sends you an email,
text message, contacts you on social media, to just give a little
token that says, ‘‘Here is the proof that I am the legally traceable
person.’’
61
Ms. STOKES. Thank you, Representative. There are activities un-
derway in the industry to try to come to that, and I would think
that would benefit everybody.
Mr. FOSTER. It seems like, when—like one of you mentioned the
error message on the screen that sort of triggered a big relation-
ship that turned—that was just completely fraudulent. If that—just
it became standard practice, and then you can contact me. Someone
can send me an anonymous text, and I will just assume it is com-
ing from some AI-generated trash. If they are willing to identify
themselves, then I will pick it up, even if I do not recognize the
name. It seems like it is a much healthier way to end up with this
wave of identity fraud that we are seeing.
Another thing, a lot of you mentioned the need to catch this at
the front door and the use of technology. One of the new pieces of
technology that may become important are these AI personal as-
sistants and companions that are really, in some cases even simple
robots that seniors fall in love with when they have—get into mem-
ory care situations or, just the taxi driver I know spends his day
in conversation with an AI asking him questions about sports
scores or how the wild fire is doing. It seems like on an entity like
that, if properly designed and regulated, could be sort of looking
over the shoulder of elders as they are on the internet and saying,
hey, you know, this AI personal assistant, which is being rolled out
by dozens of AI companies, could, if done right, really be the first
line of defense against this. Are you—is anyone aware of something
like this that is under development or being marketed that way?
Ms. STOKES. Thank you, Representative. I am not aware of those.
I am sure that it is out there, but we have grave concern about the
misuse of generative artificial intelligence.
Mr. FOSTER. Well, this would be an AI on your side. This would
be a product provided to that person whose job it was to defend
that person against the wave of garbage out, AI-generated garbage
on the internet. It seems like there may be something there, and
it would be an interesting project for a nonprofit, for example, or
just a company to think about developing because that—what you
would really love is that, if every senior on the planet had a benev-
olent advisor looking over their shoulder and saying, ‘‘You know, I
am very familiar with the millions of frauds that exist and what
you just are getting here on your screen looks a whole like a fraud
I have seen a thousand times before,’’ and that can be done it
seems with properly regulated AI assistance. It seems like that is
a real opportunity. Any thoughts you had on that or anything that
you are aware of being developed I would be interested in.
Let us see. I guess, Representative Vargas made the point I
wanted to make about the tension between knowledge sharing and
privacy because, when you are talking about knowledge, you are
talking about knowledge of things that, where there is no warrant
and no—not necessarily probable cause—but, if you see the whole
picture, you can assemble the probable cause. It seems like that is
very sensitive legal grounds, legal territory to try to figure out how
to strike that balance. I just—we have to make sure that, as politi-
cians, we are not sort of making two inconsistent requests of what-
ever legal system we set up for that.
62
Anyway, I guess, that—last quick question. What fraction of the
ByBit hack money has been recovered, the $1.5 billion North Ko-
rean—what fraction has been successfully laundered?
Ms. BURNS KOVEN. Thank you for the question. I am not familiar
with the current status. This is an ongoing investigation, but
Chainalysis has aided the recovery of $40 million to date of that.
Mr. FOSTER. Okay. At one point—most—a big part of it has been
successfully laundered and is lost forever. Is that correct?
Ms. BURNS KOVEN. It is ongoing, sir.
Mr. FOSTER. Thank you. I yield back.
Chairman DAVIDSON. Thank you, gentleman.
The gentlewoman from California, Mrs. Kim, is now recognized
for 5 minutes.
Mrs. KIM. Thank you, Mr. Chairman. I want to thank you for
holding this hearing, and I want to thank our witnesses for joining
us today.
Recently, I have been really concerned about the role that the
Huione group plays in cyber scam operations.
Ms. Koven, I know that Chainalysis played a very sizable role in
exposing the group’s illicit activity. Can you break down what ex-
actly your research found?
Ms. BURNS KOVEN. Thank you for the question. We have been
tracking Huione for a long time. Since 2021, Huione has processed
$70 billion worth of cryptocurrency. Huione Guarantee operates as
peer-to-peer marketplace allowing venders and buyers to connect.
It receives a profit, a fee from those transactions. These vendors
are nakedly selling scam material, social media accounts, money
meal services. Huione also offers an exchange capacity, and it is a
one-stop shop for scammers giving them everything they need to
conduct scams at scale for cheap.
Mrs. KIM. Those that are critics of blockchain often paint it as
a technology existing primary to launder money or for other illicit
activity. However, they fail to realize that the transparency that
comes with the digital ledger can make it easier to identify and
shut down bad actors.
Ms. Koven, how did you leverage blockchain technology in your
investigation in Huione group?
Ms. BURNS KOVEN. The blockchain reveals a very detailed story
about Huione, way more granularity than we would ever have from
traditional financial institution investigations, and it paints a very
vivid picture of its illicit exposure.
We see many of our scams are using Huione as a common de-
nominator, the common place to launder cashout funds, but also re-
invest the proceeds of scams for additional materials used to target
additional victims.
It provides a very powerful tool for financial institutions that le-
verage our platform for transaction monitoring, as well as inves-
tigative law enforcement to understand its inner workings.
Mrs. KIM. As we try to shut down organizations like the Huione
group, do you think sanctions are an effective tool?
Ms. BURNS KOVEN. Sanctions are certainly a powerful tool, one
tool in the toolbox. I think more clarity would enable financial in-
stitutions and cryptocurrency businesses that leverage our data to
understand if and when they have exposure, whether they have
63
customers sending to or receiving funds from Huione; it essentially
cuts Huione off from the mainstream crypto ecosystem.
Mrs. KIM. Could you give us an example of how this was actually
used and—it was sanction—was being effective?
Ms. BURNS KOVEN. Sanctions have been most effective when co-
ordinated with law enforcement. That one-two punch of not only
designations but also takedowns.
Just last month, Garantex, which is a sanctioned Russian serv-
ice, persisted despite sanctions. Certainly at any—any
cryptocurrency business with receiving from or to Garantex has the
ability to block those transactions effectively.
What we are now examining is, because Garantex has been
blacklisted, it is potentially rebranded, but it allows us to follow
the money trail to identify that next iteration. Even when they are
in jurisdictions that are not compliant with Western law enforce-
ment, we can still impose cost; we can inject friction.
Mrs. KIM. Thank you. I want to shift gears now and focus on the
burden that suspicious activity reports have become on community
financial institutions.
Mr. McLaughlin, I want to ask you the questions. For community
banks that have smaller regulatory teams, how much harder is it
to complete the SARs with the level of details that is required?
Mr. MCLAUGHLIN. Thank you for your question. The burden on
a smaller financial institution versus a larger institution is greater.
At a larger financial institution, there is an investment in automa-
tion and other ways to beat the investigative process and the SAR
filing or CTR filing more automative and faster.
At the community bank or smaller financial institution level, the
burden is on the person. The person has to basically write the who,
what, where, when, how, and why the activity took place, and in
great enough detail so that we are turning over SARs to the law
enforcement that is considered actionable intelligence. We do not
like getting feedback that we need to amend SARs or things like
that to provide more data. We look to provide as much data upfront
so that law enforcement can take it, but it is a very burdensome
process because, at that level of institution, there is not a lot of au-
tomation that takes place.
Mrs. KIM. Thank you very much.
I yield back.
Chairman DAVIDSON. Thanks, Mrs. Kim.
The gentleman from Illinois, Mr. Casten, is now recognized for
5 minutes.
Mr. CASTEN. Thank you, Mr. Chairman.
Mr. McLaughlin, first, I just want to State the obvious: You cur-
rently have systems in place, right, to block, freeze, reject any
transactions and report them to the Office of Foreign Assets Con-
trol (OFAC) if they are done by shady characters, sanction evaders,
child traffickers? Is that a broad, yes?
Mr. MCLAUGHLIN. Yes, sir.
Mr. CASTEN. Okay. I am glad to hear it. You would be in trouble
if you said anything else.
Tomorrow, the committee is going to markup stablecoin legisla-
tion, which would include language to treat stablecoin issuers as fi-
nancial institutions under the Bank Secrecy Act, in which case
64
they would also have to comply with anti-money-laundering, Know
Your Customer rules that you comply with as well.
Is it your view that, if—that stablecoin issuers should be subject
to those same rules that you comply with, regardless of how those
rules may change, the rules should not be different for one finan-
cial institution to another?
Mr. MCLAUGHLIN. Thank you for your question. Yes, sir, I do be-
lieve any product, service, industry, or technology that is respon-
sible for moving funds between customers or citizens has to be sub-
ject to regulation to make sure that they are protecting the cus-
tomers or——
Mr. CASTEN. Okay. Since you have presumably got some experi-
ence filing SARs reports and what-have-you, can you speculate on
what the bad guys would do if we had a stablecoin regime where
all of a sudden, they were not subject to the same rules that a de-
positor at your institution is subject to.
Mr. MCLAUGHLIN. Thank you, again. I can speculate that the bad
guys would become even more aggressive in the space in terms of
targeting vulnerable individuals to defraud, steal, and abuse the
customers of the stablecoin.
Mr. CASTEN. Well, I certainly agree. I am glad to hear you say
it. I raise that because some of my colleagues on the other side of
the aisle believe that stablecoin issuers should not have to comply
with anti-money-laundering rules, and I guess, if you are here to
represent our Nation’s child traffickers, that is a good position to
have. But I think it is important to make sure we keep those pro-
tections.
Ms. Koven, I want to move to you just to think about what might
happen if we do not have those protections in place. My under-
standing, from your 2020—from Chainalysis 2025 crime report is
that stablecoins account for 63 percent of all illicit transactions
that you had tracked and that sanctioned entities are increasingly
using stablecoins because of the difficulty of using the U.S. dollar.
Do I have that basically right on what your 2025 report said?
Ms. BURNS KOVEN. Yes, sir. Stablecoins have become the cur-
rency of blockchains. They are by far the most transacted
cryptocurrency today and we support efforts to establish regulatory
frameworks across stablecoin issuers. Robust consistent standards
across this growing market can ensure——
Mr. CASTEN. I appreciate that, but I just want to focus on that
63 percent of the illicit activity is done on stablecoins, and I want
to understand that number because my understanding of how what
you can track is that you cannot see the off-chain transactions,
right?
Ms. BURNS KOVEN. Correct.
Mr. CASTEN. It is 63 percent of the stuff that is trackable, but,
presumably, if the bad guys know what is trackable, there might
be some—there might be more than 63 percent if you could track
everything.
Ms. BURNS KOVEN. As an investigator, for me personally it is a
gift when illicit actors decide to dabble on stablecoins because of
the traceability and, also, seizability midstream.
65
Mr. CASTEN. It is sort of like I love the guy who robs 7-Eleven
without a mask and holds his ID up to the camera before he pulls
the gun out. Right. Presumably there is more there.
Now, I say that because, if I am a bad guy and we do not regu-
late stablecoins, I can imagine a scenario where I go on to buy
some other kind of crypto. I use that to launder money. I then
bring that onto an exchange that is issuing the stablecoin, convert
it to stablecoin. Those are all off-chain transactions. You would not
see any of that, right, if that was the means of money laundering?
Ms. BURNS KOVEN. We have still had spectacular seizures, in-
cluding a $225 million seizure of stablecoins associated with the
scam funds. Scammers know it is visible and traceable but are still
taking the risk of dabbling in it.
Mr. CASTEN. I am not saying this to criticize Chainalysis. I am
just saying that, because you are not tracking the off chain, if I
bought another crypto, went onto an exchange where the exchange
was issuing this—because the exchanges run their own ledgers,
right? That is—you do not see that stuff, right.
That is, like you mentioned Garantex earlier, but my under-
standing is that Garantex loves Tether because they can do all that
sort of stuff and bypass the system. Even though we have, hope-
fully, we are clamping down on Garantex, you could still do that
inside other exchanges and not track that, right?
Ms. BURNS KOVEN. Absolutely. That is why regulatory frame-
works that put standards on those cryptocurrency businesses to un-
derstand all this swapping that is going on is imperative.
Mr. CASTEN. I really appreciate your expertise. I am out of time.
A marker for tomorrow: Let us make sure we do not make things
easier for the bad guys.
I yield back.
Chairman DAVIDSON. I thank the gentleman.
The gentleman from Tennessee, Mr. Ogles, is now recognized for
5 minutes.
Mr. OGLES. Thank you, Mr. Chairman.
To the witnesses, a new landscape has developed before us, and
the bad actors have clearly figured out a way to thrive in that envi-
ronment.
I want to go back to Huione. Up until January, Apple and Google
users on those two platforms could access—Ms. Koven, when you
look forward to Huione, what is currently the accessibility for
Americans or Westerners to that platform and other platforms that
may pose similar risks?
Ms. BURNS KOVEN. Yes. We are seeing scam syndicates primarily
leveraging these compounds. Huione Guarantee continues to be the
common denominator for the majority of scams that we see, includ-
ing the laundering of scammed proceeds, as well as facilitating the
tools and services needed to perpetrate the scam, so identities and
data to contact and reach out to Americans for targeting of these
confidence and pig butchering scams.
Mr. OGLES. If you could wave a magic wand, what would be your
fix, what would be the defense, that firewall that we put up here
to protect the end user, the Americans, from this type of scamming
activity.
66
Ms. BURNS KOVEN. Chainalysis has flagged Huione in our prod-
ucts so that financial institutions with exposure to Huione can
make risk-based decisions on funds going to or coming from that
platform.
More regulatory pressure on institutions that are flagrantly
abusing or flouting regulatory norms is important. Closing those
gaps for AML standards is important because of this jurisdictional
arbitrage is certainly occurring.
Mr. OGLES. Obviously, this is focused in China, but what about—
are there other nation-states that you have concerns about who are
doing similar—or learning from other bad actors and scaling up to,
quite frankly, abusing Americans? My apologies.
Ms. BURNS KOVEN. Certainly, if Huione did not exist, there
would be other jurisdictions, other services ready to take its place,
and so we need to continue to use blockchain analytics to under-
stand where these funds are going and who—where the illicit users
wind up having success laundering funds.
Mr. OGLES. Well, back to this platform, when you look at the
child trafficking that is taking place and the movement of dollars,
there has been—again, the bad actors have leveraged this tech-
nology to monetize the abuse of individuals but, in particular, chil-
dren. Again, what are next steps in to combat that, being more ag-
gressive in that space as we—as this is becoming really a plague
of our society?
Ms. BURNS KOVEN. These are—these scams are operated by orga-
nized criminal syndicates involved in not only scamming but gam-
bling, child trafficking, and sex trafficking. Being able to find those
centers of gravity, inject operational friction, deprive them of funds,
so seizing funds, and, also, being able to cause them to be a pariah
in the ecosystem is incredibly important. We need that blockchain
analytic capability to understand where the funds are going and
identify those behind it.
Mr. OGLES. In other words, go after the money at the end of the
day, right?
Ms. BURNS KOVEN. Yes.
Mr. OGLES. Mr. Chairman, I would love to get—when you talk
about the regulatory regime that our colleague from the other side,
I would love to get your thoughts over the next few—my remaining
time on what you envision as a regulatory regime for stablecoin
and, quite frankly, the caution that we must—how we must pro-
ceed with caution so that we do not disrupt our marketplace that
can be a benefit to the market but at the same time understanding
there are victims in the process.
Chairman DAVIDSON. I think—thanks for the dialog here, but I
think Mr. Casten’s concerns about illicit finance are well placed,
and it highlights that technology is changing. Stablecoins are a lit-
tle different way, and that is why our witness from Chainalysis, I
think you did a great job answering, and we like when things are
on chain; we can follow it even easier.
When I am talking about the things in my other committee, in
Foreign Affairs, a lot of the things that we are looking at with non-
State actors that are circumventing our sanctions, which are things
our committee does—doing those kinds of things on chain are more
traceable. In a lot of ways, that is exactly what we want.
67
Sometimes we do not even want to turn off the flow of cash im-
mediately. We want to be able to follow the flow so that we can
actually target, in the case of warfare, connect targets.
Then, in the case of going after organized crime, we do not nec-
essarily want the guy working out of mom’s basement. We want to
know who he is reporting to. The question is, are those tools bet-
ter? We are going to talk about that in a lot of ways.
Thanks, Mr. Ogles.
Mr. OGLES. I yield back.
Chairman DAVIDSON. The gentleman’s time has expired, and he
has yielded.
The gentleman from California, Mr. Liccardo, is now recognized
for 5 minutes.
Mr. LICCARDO. Thank you, Mr. Chair.
Thank you to our witnesses for all this information. The hearing,
of course, is captioned ‘‘Follow the Money,’’ and I used to be in-
volved in prosecuting drug traffickers and human trafficking as a
Federal prosecutor and later as a District Attorney (DA). Certainly
I had plenty of challenges following the money when we knew that
there was information being provided by entities that was false,
that would conceal who the actors were and who was controlling
them, and, most importantly, who was getting the money from the
criminal enterprise because we knew those were the folks who
were really running the show.
I will give you a quick example. We had, I remember, a Cuban
national who was controlling a major human trafficking enterprise
in southern California, of course, using entirely U.S. corporations,
filed under California and other States’ laws, with U.S. citizens es-
sentially, ostensively being their officers.
I am concerned, as I know the National District Attorneys Asso-
ciation is also concerned, based on what we see from their state-
ment, December 2024, about this legislation that we are currently
considering that would exempt every U.S. corporation under a cer-
tain threshold, the size, from Corporate Transparency Act’s re-
quirements providing basic information—information—I am
sorry—basic ownership information to FinCEN.
Let us be clear about what that information is under the law. It
is the name of the owner, their date of birth, their address, and
some identifying number from a driver’s license or passport, or
some other government—that is it. Four items.
Now, my experience, certainly trying to get the identity of those
individuals controlling these entities that are engaged in criminal
activity, was pretty important. I guess I just want to ask, Ms.
Stokes, does it help, based on your experience, to be able to have
this kind of information if we are trying to combat fraud?
Ms. STOKES. Thank you, Representative. Absolutely the informa-
tion is critical, and I just want to point out that we have heard a
lot about concerns of administrative burden and concerns of data
privacy.
I want to turn to the burden of the victim. When you look in the
aggregate of how much has been stolen just in 2023, an estimate
from the FTC is $158.3 billion, that is three times the revenue of
the Coca Cola company. We have to understand that, yes, there are
burdens on businesses, and maybe some could be put together bet-
68
ter than others, but we cannot be moving away from rules that
help protect consumers.
Mr. LICCARDO. I agree, Ms. Stokes. In fact, I believe Mr. Brabant
suggested somehow or another that corporations have to hire Cer-
tified Public Accountants (CPAs) and other outside counsel to be
able to submit this information about the name of the owner, the
date of birth, the address, and their basic, I guess, driver’s license
number. Is that your experience, that you need outside counsel to
do such things?
Ms. STOKES. Thank you, Representative. I cannot speak to that
because that is not the space I work in, but I hear your point.
Mr. LICCARDO. $153 billion in losses.
Ms. STOKES. 158 billion.
Mr. LICCARDO. 158 billion. Thank you for that.
Mr. Brabant, you might have guessed, I was going to you next.
I am trying to understand why providing these four basic pieces of
information, which, by the way, I had to provide when I opened an
LLC last year—any bank would require it. It is pretty basic infor-
mation—what is the extraordinary burden involved here.
Mr. BRABANT. It is also a photocopy of a driver’s license, but it
is that information that challenges the substantial control prong.
I think one thing that is getting lost here is that every bank al-
ready has this. This is a duplication of the customer due diligence
role, which already exists. Every single LLC that has a bank, if the
bank is doing its job, they have this information. What this is real-
ly——
Mr. LICCARDO. What happens if the bank has individuals who
are involved in criminal activity? Would you not want that infor-
mation in the hands of those who are investigating criminal activ-
ity, not those who may be——
Mr. BRABANT. Anyone who is investigating could subpoena the
bank at any time.
Mr. LICCARDO. What happens if you are just investigating for the
first time and you actually need to know who you can subpoena,
and you do not know exactly where to go because you do not have
ownership information to begin with?
You raise concerns, for example, about criminal threats to these
companies, but, in fact, the law is very clear under title 31: Pen-
alties only accrue if you are fraudulently reporting this informa-
tion, willfully and fraudulently reporting information that is false.
Somehow or another you have cast this as some kind of great crim-
inalization of corporate America. How can that be?
Mr. BRABANT. That is a knowing and willing standard, which is
usually in the eye of a prosecutor.
Mr. LICCARDO. Not knowingly willing. It says willfully provide
false or fraudulent. That is what the statute says. Not knowing; it
says willfully. Let us be very clear about what the statute says.
Mr. DAVIDSON. The gentleman’s time has expired.
Mr. LICCARDO. Thank you.
Mr. DAVIDSON. The gentlewoman from Florida, Ms. Salazar, is
now recognized for 5 minutes.
Ms. SALAZAR. Yes. Thank you, Mr. Chairman, and thank you to
the witnesses.
69
My name is Maria Salazar. I represent District No. 27 in Florida,
which includes the city of Miami. For what I have been studying,
my hometown was ranked number one in the Nation with the high-
est per capita fraud in the country. That cost Floridians over $850
million. That said, Miami is a great place, but this is pretty embar-
rassing.
I would like to ask, Mr. McLaughlin, if you could please explain
to us why, according to the FTC fraud report, Miami is number one
in the Nation for reported fraud. Why is that? Thank you, Mr.
McLaughlin.
Mr. MCLAUGHLIN. Thank you for your question. I cannot really
answer as to why Miami in particular is ranked number one, but
I can tell you that—I can tell you that the financial institutions
today that I have had the honor of working with and partnering
with have dedicated time, energy, and, more importantly, resources
to developing upfront detection of fraud. However——
Ms. SALAZAR. Is there any specific reason why that area in the
country, specifically the city of Miami, is the number one in the
country for fraud? What are we attracting?
Mr. MCLAUGHLIN. If I would have to take a guess it is the popu-
lation of the potential vulnerable population that resides within the
State of Florida.
Also, the availability of being able to reach Miami from a foreign
country also would probably play a part in that.
Having the ability to contact an elder in Miami and talk about
the investment opportunities maybe in their home country; it exists
greater than in other large areas of the country. Again, that is just
me taking a guess using my experience over time, but my fellow
witnesses may have a better answer than I do.
Ms. SALAZAR. Maybe, Ms. Koven, would you like to give us
maybe your opinion as to why the city that I represent is number
one for fraud in the country.
Ms. BURNS KOVEN. I am unfamiliar with Miami in particular,
but, from my experience, scammers are targeting Americans indis-
criminately and are looking to develop relationships with individ-
uals over text and social media and very happy to have their hands
on American data to strike up those conversations because America
is a target-rich environment. It is a wealthy country, and it makes
it a prime target for these fraudsters.
Ms. SALAZAR. Any additional tools, any of you who would like to
share with us—any additional tools or ideas that we should con-
sider in order to stop this or make it a lot harder for these
scammers to attack our constituents?
Ms. STOKES. If I may, Representative.
Ms. SALAZAR. Of course.
Ms. STOKES. One of the points that was made a little bit ear-
lier—I think the targeting does have a lot to do with where older
populations are. If you broaden your look beyond Miami, you will
see probably the top five States where the highest number of older
adults live.
It is not that they just target older adults, but when they get
older adults there is a much bigger payout because they have the
assets, right. That is one thing.
70
Another thing is that this is organized crime, and our system of
law enforcement just is not resourced or is not able, because of
other competing demands, to look at these crimes through an orga-
nized crime lens. If you did, you would get the $10,000 grandparent
scam in Miami connected to the $10,000 grandparent scam in Ten-
nessee, and all of a sudden, it is a million-dollar threshold-breaking
case.
There is a new initiative underway that will launch in April that
is going to do just this, the National Elder Fraud Coordination
Center (NEFCC), and I would love to tell you more about that if
you are interested.
Ms. SALAZAR. Yes. Basically, what you are telling us is that we
are going to be honing and targeting the senior population to ex-
plain to them or to send the message to be very careful. That
means that our seniors do not understand that they are the num-
ber one prey for this type of scammers.
Ms. STOKES. Thank you, Representative. I can tell you my job is
to educate older Americans, and within 2 years of doing this, I real-
ized we cannot educate our way out of this and NEFCC is not
about educating. It is about pulling data together from the private
and public sectors to solve.
Ms. SALAZAR. We cannot educate—I mean, my time is up but just
give me 30 seconds. Why do you think education is not the way to
go with the senior population?
Ms. STOKES. We have been saying education has been the answer
for years, and where are we? You know, the $158.3 billion, $61.5
billion of which was stolen from older adults in 2023, it cannot
work on its own. Because we relied on that, it served to deprioritize
any other activity that could have gone to mitigate the loss that is
now growing so meteorically.
Ms. SALAZAR. Thank you. I yield back.
Chairman DAVIDSON. Thank you. I appreciate the dialog there.
The gentlewoman from Michigan, the Chairwoman, also the
Chairwoman of the full Republican Conference, Mrs. McClain from
Michigan is now recognized.
Mrs. MCCLAIN. Thank you and thank you all for being here. This
is a really important topic. I think—and something that I think we
really need to figure out how to get our arms around. Again, I ap-
preciate you holding the hearing, as well as talking about this.
I want to start with Ms. Koven. I am trying to understand
blockchain, the role it plays, but could blockchain analytics or other
technological solutions, so to speak, streamline the filing and anal-
ysis of SARs and CTRs? If the answer is yes, which I hope it is,
could you expand on that a little bit?
Ms. BURNS KOVEN. Yes. Thank you for the question. Blockchain
analytics is already enriching SAR and CTR quality. Our cus-
tomers from the private sector are leveraging the insights from our
data to file their SARs and CTRs today. It paints a very vivid pic-
ture of the entire kill chain of events.
If we are talking about scams in particular, you have a much
more vivid color of where the funds are going and coming from,
counterparties as well, much more so than you would in the tradi-
tional financial industry.
71
Mrs. MCCLAIN. Is the timing a lot quicker as well, I am assum-
ing?
Ms. BURNS KOVEN. Yes, ma’am. That is correct. Cryptocurrency
is an attractive asset for legitimate uses, as well as illicit, for its
speed.
Mrs. MCCLAIN. In my opinion, we have all these governmental
agencies, and we have these rules and regulations, and at times
they are so cumbersome and at times overburdening for the busi-
nesses where I think the businesses are trying to do the right
thing, and people are trying to do the right thing; it is just the vol-
ume is so immense, right, that it just takes time to go through
that.
One of the biggest advantages I see, and I would like to get your
opinion on this, is the time, because, to your point, the timing is
crucial on when we find these. Could you talk a little bit about the
timing of this and the timeframe, how the timeframe is shortened?
Ms. BURNS KOVEN. Yes. We also provide real time transaction
monitoring allowing financial institutions to get alerts on funds in-
coming or off—going off their platform, and they can be alerted in
real time to these funds. Really time is of the essence, and current
processes, reporting, and information together sharing is painfully
slow. Even though cryptocurrency and the blockchain enable trac-
ing and freezing, time is really of the essence. We have to make
sure that those insights are delivered in a timely fashion.
Mrs. MCCLAIN. Do you have any measurables on that?
Ms. BURNS KOVEN. No, ma’am.
Mrs. MCCLAIN. Okay. All right. Just curious. Thank you.
Mr. McLaughlin, how can FinCEN improve its communication
and feedback mechanisms with banks and blockchain analytics
firms following SARs and CTR submissions? Could you talk a little
bit about that?
Mr. MCLAUGHLIN. Sure. Thank you for your question. As every-
body can probably tell, the point of a lot of the things I have said
today is creating an open and transparent two-way communication
between the public and private sectors so that we can begin focus-
ing on the resources that we have on the threats that our cus-
tomers face on a daily basis.
Working with FinCEN to establish a working group or a task
force or whatever terminology you want to throw at it would allow
us to begin establishing and doing data analytics on what the gov-
ernment is seeing, what law enforcement is seeing and what the
private sector is seeing so that we can—so that we can begin put-
ting pen to paper on what a true risk-based approach means for fi-
nancial crimes across the board, fraud, money laundering, sanc-
tions and terrorism finance.
Mrs. MCCLAIN. Are you getting any pushbacks or running into
any roadblocks on that?
Mr. MCLAUGHLIN. I would not say roadblocks or pushbacks. I
think with the increased scrutiny that all of you are bringing to
light today, I do think we are seeing across the industry a knowl-
edge-sharing exercise taking place, whether that be informally or
formally, but more work is needed.
I think, when we look at things like the Federal Financial Insti-
tutions Examination Council (FFIEC) manual and the revisions
72
there. I do think a public, private, and law enforcement type en-
gagement would allow us to put down what the actual require-
ments are so that we can point to the crimes that we are trying
to capture.
Mrs. MCCLAIN. Are you getting any pushback on that, public-pri-
vate partnerships?
Mr. MCLAUGHLIN. Personally, with the folks that I work with,
no. It is just not official. It is outside the hallways here or at a con-
vention or a conference that knowledge sharing really exists.
Mrs. MCCLAIN. Thank you.
With that, Mr. Chairman, I yield back.
Chairman DAVIDSON. Thank you, gentlewoman.
The gentleman from Iowa, who is also the vice chairman of the
committee, Mr. Nunn, is now recognized for 5 minutes.
Mr. NUNN. Mr. Chairman, thank you very much for putting this
important hearing together today. We all know that my home State
of Iowa, in the heart of the heartland, my senior citizens are prob-
ably target number one for the scams. It is happening across not
just Iowa but the entire country.
I am proud to say that the United States is also probably the
best place for innovators to come to the forefront and really be the
superheroes in the story of fighting back.
In November, the Department of Justice used blockchain to
freeze approximately $225 million that were used in a human traf-
ficking scheme. However, even amongst this technological solution
situation, we remain challenged for most of our State and local law
enforcement entities to get an opportunity to play, as, Mr.
McLaughlin, you just highlighted.
One victim back in my hometown in Iowa, 68-year-old veteran,
lost over $100,000 to a scam, and challengingly, local law enforce-
ment could not even begin to help.
That is why today, Mr. Chair, I am introducing the Bipartisan
Guard Act to give State and local law enforcement agencies access
to the technology they need to combat these financial fraud crimes
and pig butchering scams.
Let us get started on this. Ms. Koven, I know that you and I are
on the same page here because, in your testimony, you advised the
need to train more people on things like blockchain, those digital
rails in which the future of technology is going to operate on here
in the United States. This is exactly what the Guard Act, my bill,
attempts to accomplish.
I understand that your company has trained people in these
technologies both on the State and even down to the local level.
Can you briefly walk us through some of the examples, and if there
have been stories of success here?
Ms. BURNS KOVEN. Yes. Thank you for the question. I am sorry
to hear about your constituent being defrauded. It is a story we
hear all too often, unfortunately.
At Chainalysis, though, we do work with over 70 State and local
governments around the country, and we have seen astounding
successes when law enforcement is trained and equipped properly.
We have only scratched the surface, unfortunately. Particularly
with the proliferation of these types of scams, we need to better
equip State and local law enforcement to understand how to handle
73
these cases and connect a single fraud victim to a wider network
and increase chances of disruption and recovery.
Mr. NUNN. Jackie, I think you really highlighted a point here
that this has happened in the physical world before, and we have
had good game plans to go after it. What our Guard Act bill is aim-
ing to do is to create these fusing centers of best practices at the
Federal level, marry them up with local law enforcement agencies
and provide those level of resources to really go after that so that
an Iowan who loses a hundred thousand, or a New Yorker who
loses a million all have the same access to the same resources. Is
this what you have seen through your experience to be a successful
solution?
Ms. BURNS KOVEN. Yes, sir. We should have every advantage be-
cause the scammers are leveraging cryptocurrency, but time is of
the essence. What we have seen in working groups and small-scale
operations is that, when private and public sector are sharing in-
formation dynamically, we can turn that wealth of information into
actionable insights quickly and have stunning successes.
Mr. NUNN. Thank you, Ms. Koven.
Ms. Stokes, I want to thank you and your incredible team at
AARP. You are on the frontline not only guarding our seniors, but
you have helped bridge this to be a bipartisan effort. Our Guard
Act is really brought together by Mr. Gottheimer and me, a Repub-
lican and Democrat, really working for the best interest of the
American people here.
I would like to, one, ask, how could retirees benefit from a local
law enforcement that would have access to these greater tools that
the Guard Act could provide so they can get to know about
blockchain, understand how financial fraud works, and really ad-
dress the sources of these crimes to stop the number of victims we
are seeing?
Ms. STOKES. Thank you, Representative and AARP is very proud
to support the Guard Act. I think it is critical.
We talk to probably a hundred thousand victims a year, maybe
500 calls a day, and the vast majority of fraud victims where
money has been stolen; they have no recourse. They will call local
or State police, and even if police that they talk to understand that
it is a crime, they will still say, ‘‘There is nothing we can do about
it,’’ and sometimes do not even take the report, which is a chal-
lenge in and of itself. Anything that we can do to not only provide
the tools but, importantly, to train local and State law enforcement
on things that they simply do not have the training on right now
would be of great benefit to our constituency.
Mr. NUNN. Thank you, Ms. Stokes. I want to, again, say thank
you to AARP for helping lead this because it is not only my seniors
who want this; it is every American who needs this and no one
more so than my local law enforcement, who wants to be able to
help our own community get better. This gets us in the right direc-
tion.
Mr. Chairman, thank you very much. I yield the remainder of my
time.
Chairman DAVIDSON. Thank you very much.
74
I thank all of our witnesses and our colleagues for a great hear-
ing today. Kind of scary what is going on for the citizens of this
country. Hopefully this will help make a difference.
Without objection, all members will have 5 legislative days to
submit additional written questions to the witnesses, and to the
chairman for questions.
Witnesses, please, if you get those, respond no later than May
6th.
[The information referred to can be found in the appendix.]
This hearing is now adjourned.
[Whereupon, at 11:56 a.m., the subcommittee was adjourned.]
APPENDIX
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